Case Can't Be Sealed Just Because Party Alleges There Are False Statements in Pleadings

From Continental Indemnity Co. v. Timothy Coffey Nursery/Landscape, Inc., decided yesterday by Magistrate Judge James Wicks (E.D.N.Y.):

Defendant Timothy Coffey is the owner, founder and president of Defendant Coffey Nursery/Landscape ("Coffey Landscape") and Defendant Ann Amiaga is Coffey Landscape's office manager. Defendant Isaac Orellana was performing tree trimming and tree removal services for Coffey Landscape when a branch fell on him, causing paralysis of his lower extremities.

Plaintiff [insurance company] alleges that leading up to and including the date of the accident, Defendants had not disclosed Defendant Orellana as an employee in the weekly payroll reports submitted to Plaintiff, nor did Defendants pay premiums for Defendant Orellana. Plaintiff further alleges that a week after the accident, Defendants submitted a payroll report stating that Defendant Orellana was hired two days before the accident, when in reality he had been working for the company for 25 years and was paid in cash. Based on this alleged materially false representation, Defendants submitted a claim to Plaintiff for workers' compensation insurance coverage for the accident. Plaintiff also asserts that in order to escape paying a higher premium, Defendants did not disclose that Coffey Landscaping performed tree removal services in addition to landscaping services. …

Now, almost a year after the action was commenced, Defendants move "to seal the entire record of this case." Plaintiff has taken no position on this application. Notwithstanding that the motion is uncontested, the court is obligated to consider whether public access to the court records should be denied….

Here, aside from the scheduling Orders on the public docket, the "entire record" consists of Plaintiff's Complaint, Defendants' Answer, Plaintiff's motion to strike affirmative defenses, and Defendants' opposition to plaintiff's motion to strike. These are quintessential judicial documents. Each is relevant to the performance of judicial function and would likely influence the court's ruling on a motion. Thus, Defendants have the burden of overcoming the presumption of public access to these documents.

Defendants contend that the documents filed contain personal and sensitive information such as confidential business practices, statements regarding Defendants' character and integrity, and financial information that would affect Defendant Coffey's credit and impair the business's survival. Defendants cite to In re Allergan PLC Securities Litigation (S.D.N.Y. 2020), where the court granted a portion of a motion to seal because the subject documents contained information about an algorithm that constituted a trade secret. The subject documents here (including the one attachment—the workers' compensation insurance policy) are qualitatively different as they do not contain details as to Defendants' business practices or financial records, aside from allegations that Defendant Coffey Landscaping paid Defendant Orellana in cash. This is not the type of competitive, proprietary information required to overcome the presumption of public access. Moreover, Defendants' general concern that their business and reputation will be adversely affected are made in a conclusory fashion and do not satisfy their burden.

Defendants also rely on Eugene S. v. Horizon Blue Cross Blue Shield of N.J. (10th Cir. 2011), another distinguishable case. There, the subject records contained personal and private medical information regarding plaintiff's minor son. Here, there are no medical records in any of the subject documents, let alone documents relating to a minor. Defendants' reliance on U.S. v. Aref, 533 F.3d 72 (2d Cir. 2008) is also misplaced….

Defendants' remaining arguments regarding defamation and trade libel are also unavailing. Even if a pleading were to contain a libelous statement, that in and of itself would not provide a basis to sue for defamation, as statements made in filed pleadings are absolutely privileged. In Bernstein v. Bernstein Litowitz Berger & Grossmann LLP (2d Cir. 2016), Defendants similarly argued that the complaint was unreliable and untruthful. The Second Circuit agreed with the district court's reasoning, namely that complaints frequently contain exaggerated or fabricated allegations, which is the very nature of judicial proceedings. The court found that sealing a complaint based on Defendants' logic "would create an untenable result—the sealing of all complaints in actions in which the plaintiff does not prevail…" Moreover, "[t]he potential for a negative impact on a party's future business or social status does not outweigh the presumption of access." See also Badinelli v. Tuxedo Club (S.D.N.Y. 2018) (holding that "[p]rotection against the possibility of future adverse impact on employment does not overcome the presumption of public access.") …

[Moreover, t]he mere existence of a confidentiality agreement entered into between the parties, does not weigh against the presumption of public access to the documents. Accordingly, the fact that the parties together anticipated or contemplated that the file would be sealed is unpersuasive….